The New Zealand CPI data is out in about 90 minutes but apart from that it should be a fairly quiet morning on the fundamental front. There is of course always the prospect of some announcements out of China but a call from yet another US committee for the Yuan to strengthen is probably going to have the opposite of its intended effect.
That means that we will be relying on market flows to generate some volatility and EUR/JPY is as usual the most likely source. We are pretty sure that Goldman Sachs was a big seller of JPY crosses in the days leading up to the civil-case announcement. If we find out that they were buying overnight, in a case of sell the rumour buy the fact, then this short covering will probably continue for a few days. On the other hand, if this was just a normal market bounce, then I suspect that rallies back towards 125.50/75 will meet with lots of grateful sellers. The EUR problems have not gone away, they are on a short ash-inspired holiday, and it will only take one more announcement from the SEC to send the JPY crosses hurtling lower again.
I’m staying in the sell-rally camp but I’m not yet sure how far the rally can go.
